Wells Fargo economist expects slow, continued growth

Overall, the U. S. economy is getting a little better. Unemployment is trending down, single-family housing starts are expected to increase by 5 percent this year and businesses are feeling more hopeful, Mark P. Vitner, managing director and senior economist for Wells Fargo Securities in Charlotte, N.C., said Thursday. “I think the glass is half full; it’s just a small glass,” Vitner told a crowd of 300 at a luncheon sponsored by the Hampton Roads Association for Commercial Real Estate at the Hilton Hotel in Norfolk.

While the line drew a laugh, Vitner said it could be 2022 before the country returns to what most people consider “to be a normal economy.” Economists did see an uptick during the fourth quarter of
2011, with Wells Fargo projecting an overall growth rate for that quarter of 3.4 percent. However, for the entire year, it looks for the economy to have grown by only 1.9 percent. The bank is predicting a 2 percent growth rate for 2012 and 1.8 percent in 2013.

Low interest rates continue to be helpful, inspiring consumers and businesses to refinance. Plus, Wells Fargo saw the largest increase in credit-card debt in 10 years among its customers in November, a development that reflects greater consumer confidence. “There has been more real improvement in the economy this year, and we’re less vulnerable than we were two years ago,”Vitner said.

Yet, he added that worrisome storm clouds continue to linger. Of particular concern is what action Greece will take on March 20 when it tries to restructure $17.8 billion debt. “Conditions in Europe are far worse than people realize,” said Vitner. “If Greece defaults in March, it could be managed. It won’t bring down the European financial system. “ However, If Italy defaults — a much larger country with more than $2 trillion in debt — that event “would be destablizing, and a lot of banks would probably have to be nationalized.”

Vitner said the U. S. could find itself in a similar situation in as little as five years if it doesn’t find a way to balance its budget and stop running up huge deficits. “At the end of the day, this is still the best place to do business ithan any place in the world,“ added Vitner. “We’ve got a lot of bright people in Washington. They just don’t get along.”

The quality of jobs being added to the economy also is a concern. In recent months, 77 percent of the new jobs in the private sector and 52 percent in the public sector have been in the lower-paying fields of retail trade, leisure and hospitality, home health care and temporary work, Vitner said.

Virginia has enjoyed stronger job growth than the rest of the country and by and large “has held up better than the rest of the country during the past two years,” Vitner said. In Hampton Roads, however, job growth was down one percent in 2011, and 25.2 percent — or about one in four homeowners in Virginia Beach/Norfolk metro area — owe more on their homes than the home is worth, according to Vitner. The area is seeing some growth in the apartment and industrial real estate sectors.